MS Takes a Beating

Instead of dismissing a breakup proposal, Judge T.P. Jackson has asked the government to update its plan to break Microsoft into smaller companies and present the alternative plan by Friday. The judge also said there would be no more hearings, indicating that his decision will be made soon.

Earlier in the hearing, Jackson had indicated that a proposal to break MS into three companies was excellent. The three-way split was outlined in a friend-of-the-court brief submitted by two industry groups, including the Software and Information Industry Association (SIIA), a Washington-based trade group (see our related news item). That brief proposed breaking MS into an operating system company (Windows), an applications company (MS Office, etc.), and an Internet company (IE, MSN, etc.). Legal experts say that the judge's actions, questions, and responses show that he is clearly leaning towards a breakup.

The judge asked why the government's proposal called for a two-way split. The DOJ's lawyer responded that Microsoft would be more cooperative in that scenario, but the judge stated that that should not be a factor, since Microsoft will not be a willing participant in any breakup scenario. The DOJ lawyer also said that Microsoft would be given a chance to plan its own breakup.

Although Microsoft has been asking for more time to prepare, Judge Jackson indicated that he found it “ironic” that Microsoft wanted more time in court, since the company has been criticizing the proceedings so heavily and has continued to state that it will appear the original finding and whatever remedy is imposed.

As a further black eye for MS, the government presented two e-mails from Bill Gates that appeared to propose anti-competitive conduct to boost Microsoft's Pocket PC PDA initiative. The e-mails mentioned making Microsoft's advanced audio/video functions work only with WinCE, and not working with the Symbian group (producers of the EPOC OS) on other projects if it worked deals with Sun.

SAM'S OPINION
Though some analysts appear to be surprised by Judge Jackson's actions (how poetic) today, I'm not. It seemed clear from the start that he believed Microsoft had been monopolistic. I'm not saying he was anything but impartial in his proceedings, but he was involved in the earlier anti-trust case against Microsoft and has been wrangling with the company for quite a while on this trial–remember when MS was trying to prove that one of the judge's fact-finders was biased against Microsoft from the beginning by showing anti-MS e-mails he had sent (ironic that Mr. Gates e-mails showed up today, eh?)? There's certainly no love lost between the judge and Microsoft.

The three-way split was what a lot of people were predicting before the DOJ put forth its two-way split proposal, since one of the main points of the case was Microsoft crushing competition to push IE. Leaving the IE folks with another dominant platform like Microsoft Office to act as a tie-in vehicle might not have stopped the “anti-competitive” behavior that so angered the DOJ and the judge.

I'll say it again: Microsoft really messed up by not settling this thing earlier. It seems like the company is pushing for more and more time to take advantage of the shake-up from the impending change in administration (doesn't matter if it's Bush or Gore) and the consequent change in DOJ officials. Who knows? Regardless, whatever Judge T.P. Jackson decides on Friday, Microsoft will fight it for as long as it can. For me, the most interesting thing that will happen on Friday is if the judge decides to impose those interim remedies the DOJ wants.